Investors and developers are looking for ‘beds and sheds’
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The pandemic has affected all areas of real estate, but few segments have been as positively affected as multi-family, a recent report notes.
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In fact, the only segment seeing even more investment demand is industrial as e-commerce’s rapid growth has fuelled a growing need for warehouse space.
This rise in demand for both sectors has led to an oft-used phrase “sheds and beds,” says Sam Dean, senior vice-president and practice lead for multi-family in Alberta for JLL, which published a recent Canadian Investment Outlook for commercial real estate.
“That’s probably been said a million times in the last few months,” he says. “Everyone wants Amazon as a tenant for industrial, and then everyone wants to invest in multi-family.”
Driving multi-family purpose-built rental investment interest is the lack of supply in residential housing across Canada, particularly affordable housing, he adds.
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With respect to Calgary, Dean notes “there has been a lot of new supply, but a lot of it has been concentrated in downtown.”
The report shows Calgary cap rates — the yield investors can earn from a property — have fallen from five per cent in 2020 on average to less than two per cent this year, an indication investors willing to pay higher prices for properties amid a lack of opportunities to invest.
Another metric in the report reflects this potentially, showing only a small fraction of the $1 billion-plus investment this year so far in Calgary has been in multi-family.
What’s more, while the city has ample rental supply right now, the majority of units are decades old, he says.
“So, I’m of the opinion that there is not too much product in Calgary; there’s just a lot of old product that, when migration returns to pre-pandemic levels, will be absorbed pretty quickly,” Dean says.
